ORIGINAL n

FClerk Of the SLuperlerECourt iDVI' MARK W. FLORY, State Bar No. 92610

JAMES K. LO, State Bar No. 227598 HARRINGTON, FOXX, DUBROW & CANTER, LLP 1055 West Seventh Street, 29th Floor Los Angeles, California 90017-2547 Telephone (213) 489-3222 Facsimile (213) 623-7929

MAY 1 4 2015

Attorneys for Plaintiff PROFESSIONAL SOLUTIONS INSURANCE COMPANY

IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF SAN DIEGO - CENTRAL, HALL OF JUSTICE

PROFESSIONAL SOLUTIONS INSURANCE COMPANY,

Plaintiff,

vs.

RICHARD J. ANNEN, an individual; SPARBER ANNEN MORRIS & GABRIEL, APLC.; THE REGISTRY REAL ESTATE GROUP; LA JOLLA COVE SUITES; and DOES 1 to 25, inclusive,

Defendants.

Case No. 37-2015-00016248-CU4C-CTL

COMPLAINT FOR:

1) DECLARATORY RELIEF: DUTY TO DEFEND;

2) DECLARATORY RELIEF: DUTY TO INDEMNIFY;

3) REIMBURSEMENT OF DEFENSE FEES AND COSTS

[DEMAND FOR JURY]

Plaintiff PROFESSIONAL SOLUTIONS INSURANCE COMPANY ("PSIC"), by and through its undersigned counsel, hereby files its Complaint as against Defendants RICHARD J. ANNEN,

("ANNEN"), SPARBER ANNEN MORRIS & GABRIEL, APLC ("SAM&G"), THE REGISTRY REAL ESTATE GROUP ("THE REGISTRY") and LA JOLLA COVE SUITES, LLC., ("LA JOLLA") (collectively "DEFENDANTS"), and states as follows:

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COMPLAINT

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INTRODUCTION

1. This is an action for Declaratory Relief. PSIC is the professional liability insurer of

SAM&G, a law firm, and ANNEN, a partner in the law firm.

2. In the underlying civil lawsuit that gives rise to this insurance coverage case, LA JOLLA

contends that THE REGISTRY and ANNEN, functioning as real estate brokers, interfered with its right

to purchase a $60 million property.

3. ANNEN tendered his defense of the referenced lawsuit to PSIC, contending that he was in

fact acting as an attorney and is thus entitled to defense and indemnity under his professional liability

insurance policy. PSIC agreed to provide, and is currently providing, ANNEN with a defense under reservation of rights.

4. By this action, PSIC seeks a declaration that it owes no coverage whatsoever in

connection with the underlying matter, and that it is entitled to reimbursement of defense fees and costs

expended on behalf of ANNEN.

PARTIES

5. PSIC is a corporation organized and existing under the laws of the State of Iowa, with its

principal place of business in Iowa. At all times herein, PSIC was authorized to do and was and is doing

insurance business in the State of California.

6. Upon information and belief, at all relevant times, Defendant ANNEN was and is an

individual residing in the County of San Diego, California.

7. Upon information and belief, at all relevant times, Defendant SAM&G was and is a

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NCMIC.2141PLEAPINOWortuthinffinal 2 COMPLAINT

professional law corporation with its principal place of business located in the county of San Diego,

California. SAM&G is the named insured on the PSIC professional liability insurance policy at issue

here. SAM&G is not a party to the underlying civil lawsuit which gives rise to this action.

S. Upon information and belief, THE REGISTRY is an entity of unknown qualification

doing business in the State of California with its principal place of business in the County of San Diego,

California.

9. Upon information and belief, LA JOLLA is a California limited liability partnership, with

its principal place of business in the County of San Diego, California.

JURISDICTION AND VENUE

10. This action relates to the availability of insurance coverage for ANNEN with respect to an

underlying civil lawsuit concerning real property located in the County of San Diego, California.

11. Venue is proper in this Court because DEFENDANTS reside and/or do business within

San Diego County. Moreover, the subject insurance policy was issued in San Diego County.

12. The amount in controversy under this Complaint exceeds the minimum jurisdictional limit of this court.

THE UNDERLYING ACTION

13. On or about January 23, 2015, LA JOLLA filed the First Amended Complaint in the underlying civil lawsuit entitled La Jolla Cove Suites, LLC., v. AIMCO Properties, L.P., et aL (San Diego Superior Court Case No. 37-2014-38978-CU-CO-CTL) ("The UNDERLYING ACTION'). A true and correct copy of the First Amended Complaint is attached hereto as Exhibit "A" and incorporated

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COMPLAINT

herein by this reference.

14. LA JOLLA summarizes its contentions in the first paragraph of the First Amended

Complaint:

1. A $3 billion REIT acted wrongfully from August 2014 to January 2015, to interfere with the performance of the superior contractual rights of others to acquire a $60 million property. The developer eventually succeeded in wrongfully knocking out the other contracts, and now wrongly holds title to the Property. The REIT is liable for the damages it caused, including the wrongful retention of the $I million deposit Plaintiff made to acquire the property. The REIT is also liable as a constructive trustee to hold the property for the benefit of those with whom it interfered. The other defendants were complicit in the REIT's execution of its acquisition of the property and are jointly and severally liable for the damages caused.

11. Richard Armen is an individual residing in the State of California, San Diego County. He is a licensed broker.

12. The Registry Real Estate Group is an entity of unknown qualification doing business in the State of California, San Diego County. Mr. Annen purports to be its Chief Executive Officer, and conducted the brokerage services herein complained of purporting to act in that capacity.

15. With respect to ANNEN, the First Amended Complaint in the UNDERLYING ACTION alleges:

16. The complaint makes additional references to ANNEN as a broker, and never references him as a lawyer or providing legal services in connection with the subject real estate transaction.

THE POLICY APPLICATION AND THE PSIC POLICY

17. On or about March 8, 2014, SAM&G, a law firm, submitted a Short Form New Business

Application to PSIC ("the Policy Application"). The Policy Application asked a number of questions, which were answered by SAM&G.

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COMPLAINT

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18. Among the questions asked in the Policy Application was:

10. Does any lawyer in the firm:

Serve as a director, officer, trustee, owner or partner of, exercise any fiduciary control or hold any equity interest in any organization other than the law firm?

19. SAM&G answered the question in the negative.

20. The Policy Application was signed by ANNEN on or about March 8, 2014 and submitted

to PSIC.

21. Based upon the representations made in the Policy application, PSIC issued Attorney

Shield Professional Liability Policy No. LPL7073179 ("the Policy") to SAM&G. The Policy period extends from March 8, 2014 through March 8, 2015. A true and correct copy of the Policy is attached

hereto as Exhibit "B" and incorporated herein by this reference.

22. The Policy carries a $2,000,000 per claim limit with a $25,000 deductible which applies to both damages and claim expenses.

23. The insuring agreement of the policy provides in pertinent part:

Section I. INSURING AGREEMENT

We will pay on behalf of any Insured, subject to the limit of liability, all sums in excess of the deductible that the Insured is legally obligated to pay as Damages and Claim Expenses because of a Claim that is both made against the Insured and reported in writing to Us during the current Policy Period or within sixty (60) days thereafter by reason of an act or omission in the perfotmance of Professional Legal Services by the Insured or by any person for whom the Insured is legally liable, while acting on behalf of the Named Insured for clients of the Named Insured...

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hiCt4 COMPLAINT

24. Definitions relevant to this action include:

Section V. DEFINITIONS

The following definitions apply to any part of this Policy where they may appear..

9. Insured means:

a. The entity or person listed on the Declarations as the Named Insured and any Predecessor Firm thereof, but only in the rendering or failing to render Professional Legal Services on behalf of the Named Insured or Predecessor Firm;

b. Any current partner, director, stockholder, shareholder, or employed lawyer of any person of entity specified in item a. above; but only in rendering or failing to render Professional Legal Services on behalf of the named Insured or Predecessor Firm;

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11. Named Insured means the person or entity listed in the Declarations and the Predecessor Firm thereof.

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18. Professional Legal Services means those services performed by an Insured in the state or states in which the Insured maintains a license in good standing to practice law for others as:

a. A lawyer;

b. Arbitrator;

c. Mediator;

d. Real estate title agent and/or escrow agent;

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23. Wrongful Act means:

a. Any actual or alleged act, error, omission, or breach of duty arising from the rendering of or failure to render Professional Legal Services; or

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COMPLAINT

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b. Personal Injury arising out of your conduct relating to the rendering of or failure to render Professional Legal Services."

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25. The Policy contains the following Exclusions relevant to this action.

Section VI. EXCLUSIONS

This Policy shall not apply to any Claim based upon, arising out of, attributable to, or directly or indirectly resulting from:

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2. Dishonest, fraudulent, criminal, deliberate, intentionally wrongful, or malicious acts or omissions committed by or at the direction of, with the knowledge of, or ratified by any Insured.

7. Any violation or breach by an Insured:

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b. In the Insured's capacity as former, current or prospective officer, director, shareholder, partner or manager of a business enterprise or charitable enterprise;

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10. Professional Legal Services performed for or on behalf of any Organization other than the Named Insured or a Predecessor Firm if, at any time when those services were performed, the Organization was or was intended to be:

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a. Directly or indirectly controlled, operated or managed by an Insured or any Insured's spouse; or

b. Professional Legal Services performed for any business enterprise not named in the Declarations which was owned by an Insured, or by a spouse of any Insured in a percentage which exceeds ten

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percent (10%) of the issued and outstanding voting stock of the shares of an Organization; or

c. If the collective equity interest of all persons and entities insured under this Policy is twenty percent (20%) or more of the issued and outstanding voting stock of the shares of the Organization."

THIS DECLARATORY RELIEF ACTION

26. ANNEN tendered defense and indemnity of the UNDERLYING ACTION to PSIC.

ANNEN contends that he acted as an attorney in connection with the real estate dispute at issue in the

UNDERLYING ACTION, and contends that he is thus entitled to defense and indemnity under the PSIC

professional liability policy.

27. Because of this contention, PSIC agreed to defend ANNEN under a nth and complete

reservation of rights, including the right to seek reimbursement of defense fees and costs pursuant to Buss v. Superior Court (1997) 16 Ca1.4th 35.

28. PSIC now brings this action seeking a declaration that its policy affords no coverage

whatsoever to ANNEN for the UNDERLYING ACTION.

FIRST CAUSE OF ACTION

(Declaratory Relief-No Duty to Defend ANNEN in Connection with the UNDERLYING ACTION)

29. PSIC incorporates Paragraphs 1 through 28 above as though fully set forth herein.

30. PSIC contends that it has no obligation to defend ANNEN in the UNDERLYING

ACTION.

31. PSIC is informed and believes and based thereon alleges that DEFENDANTS dispute this contention.

32. An actual controversy has arisen and now exists between PSIC, on the one hand, and NCMICalangja

COMPLAINT

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DEFENDANTS, on the other hand, over what coverage, if any, is afforded to ANNEN through the PSIC

Policy for the UNDERLYING ACTION.

33. Such a declaration is necessary and appropriate at this time in order that PSIC may

ascertain its rights and duties under the Policy in connection with the UNDERLYING ACTION.

SECOND CAUSE OF ACTION

(Declaratory Relief-No Duty to Indemnify ANNEN in Connection with the UNDERLYING ACTION)

34. PSIC incorporates Paragraphs I through 33 above as though fully set forth herein.

35. PSIC contends that it has no obligation to indemnify ANNEN in the UNDERLYING ACTION.

36. PSIC is informed and believes and based thereon alleges that DEFENDANTS dispute this contention.

37. An actual controversy has arisen and now exists between PS IC, on the one hand, and

DEFENDANTS, on the other hand, over what coverage, if any, is afforded to ANNEN through the PSIC

Policy for the UNDERLYING ACTION.

38. Such a declaration is necessary and appropriate at this time in order that PSIC may

ascertain its rights and duties under the Policy in connection with the UNDERLYING ACTION.

THIRD CAUSE OF ACTION

(Reimbursement Of Defense Fees And Costs)

39. PSIC incorporates Paragraphs 1 through 38 above as though fully set forth herein.

40. PSIC contends that it has no duty to defend ANNEN with respect to the UNDERLYING

ACTION, and in fact never had any duty to defend ANNEN in connection with that action, because the

allegations in the UNDERLYING ACTION do not raise any covered claim, or any potentially covered claim, under the Policy.

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COMPLAINT

HARRINGTON, FOXX, DU & CANTER, LLP

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41. PS1C further contends that it has paid defense fees, costs, and expenses on behalf of

ANNEN in connection with the UNDERLYING ACTION, under and pursuant to a full and complete

reservation of rights.

42. Pursuant to Buss v. Superior Court, PSIC is entitled to be reimbursement of all defense

fees, costs and expenses paid on behalf of ANNEN in connection with the UNDERLYING ACTION.

PRAYER

WHEREFORE, PSIC prays for judgment as follows:

1. A judicial determination and declaration that PSIC has no duty, and never had any duty, to defend ANNEN in the UNDERLYING ACTION;

2. A judicial determination and declaration that PSIC has no duty to indemnify ANNEN in the UNDERLYING ACTION;

3. For reimbursement of defense fees and costs expended by PS1C in

defending the ANNEN in the UNDERLYING ACTION;

4. For pre-judgment interest; 5. For costs of suit incurred herein; and

6. For such other and further relief as the Court may deem just and proper.

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Dated: May 13, 2015

NCMIC.2140 EADINC;SromplpintFinal 10 COMPLAINT

Dated: May 13, 2015 HARRINGTON, FOXX, DUBROW & CANTER, LLP

Ofir

By: a i/if M 4 . FiL;TRY

JA K. LI A , s r eys for Plaintiff PROFESSIONAL SOLUTIONS INSURANCE COMPANY

DEMAND FOR JURY TO THE CLERK OF THE ABOVE ENTITLED COURT:

action. You will please take notice that a jury is demanded in the trial of the above entitled

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COMPLAINT